Gordon Campbell: The Broadband Bonanza

April 23rd, 2008

John Key’s $1.5 billion boost for broadband is his first major policy announcement that isn’t an endorsement of existing Labour practice ( interest free student loans etc) or a dog bone and whistle ( boot camps for young offenders) to a niche support bloc.

The spend-up planned on broadband is also a self-declared example of the public/private partnerships that are emerging as John’s Big Idea on the economy – much more so than the usual centre – right grounds of tax cuts, upon which Labour will be competing.

Embracing PPPs so vigorously is also something of an ideological sea change for National. Likening this broadband investment to previous governments that built our railroads – as Key did in his speech – is quite a novel approach for a party whose supporters tend to regard government’s role in the economy as (a) inherently inefficient and (b) unnecessary. Under Key, National now seems prepared to concede that the wealth of New Zealand is something that government has a leading role in stimulating, and co-managing.

Mind you, the pedigree of this idea is mixed. The last time PPPs were seriously touted in New Zealand, it was by Ross Armstrong, in the context of roading. It was an idea that never really went away. Earlier this year, Labour was still touting PPPs as a possible way of financing the Waterview Connection in Auckland.

PPPs are now openly back on the agenda. Instead of National selling state assets to its business pals, it now seems more inclined to build them for them – in partnership of course. Enhancing the access to ultra fast broadband clearly has merit. We would all benefit from faster and wider broadband access, especially if government can engineer a market able to keep the costs down and the technology up to date.

Shame though that Labour – when it sold Telecom as a monopoly provider –and National, which practiced ‘light handed’ to non existent regulation throughout the 1990s, haven’t grasped that point far earlier. If John Key really wants to know why “ New Zealand has fallen behind its global competitors when it comes to broadband” he could take a long hard look across the caucus table at his colleague and former Telcos Minister, Maurice Williamson.

For the best part of a decade, Williamson left telecommunications to the vagaries of a hopelessly skewed ‘market.’ Not surprisingly, Telecom milked its virtual monopoly and under-invested in new technology, and New Zealand slipped down the broadband ladder while Telecom’s shareholders partied like 1999 was here to stay.

Question : does Key think National’s ‘light handed’ regulatory regime during the 90s worked well, and benefitted New Zealand ? Does he now embrace the recent steps David Cunliffe has taken to foster market competition – and how does Key plan to ensure this huge injection of funds does not benefit the main incumbent player, and thereby jeopardize the fledgling steps towards greater telco competition that are currently in train ?

That’s always the tricky thing about PPPs – the detail is crucial., and we don’t yet have it. The chronic criticism of PPPs is that the state gets to carry the can for the risks and associated costs, while business reaps the profits. Under Key’s plan, business will be first in line to have their broadband installation costs paid for by government – its an investment, right – then schools, health facilities and then the first tranche of homes.

As things currently stand, Key’s “five principles” meant to guide this $1.5 billion investment could hardly be more general. What he means by an ‘open access’ network is unclear, as Russell Brown says.

I’m also dead curious to see how Key intends to set about meeting principle two, about ‘ ensuring the investment does not see already planned investments cut back.’ I’d have thought the moment Key announced his plan to earmark $1,5 billion for broadband, telcos and businesses across the country starting putting a lot of their own money back into their wallets.

As for the other principles… Sure, after spending $1.5 billion on expanding broadband access, you’d hope there would be “increased broadband services.” Again, with a spend-up of this scale in mind, its hard to see Key can really be serious about “ making sure we do not end up lining the pockets of incumbent industry players.” See the Telecom comments above. How exactly, does he propose to stop this happening ?

Not that voters will get to find out anytime soon whether Key has delivered. Russell Brown estimates this ambitious plan will take at least ten years to implement – which is three elections hence. Not quite the 15 elections we will have to wait to see whether National meets its climate change goals for 2050, but once again….don’t hold your breath.

ENDS

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